Question

Exercise 21-07 b-e Carla Vista Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $65,000 and fair value of $94,500. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2020. Carla Vista expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020. Click here to view factor tables. Your answer is correct. Prepare an amortization schedule that would be suitable for both the lessor and the lessee and that covers all the years involved. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to o decimal places e.g. 5,275.) Date Rent Receipt/ Payment Interest Revenue/ Expense Revenue/ Expense Reduction of Principal Reduction of Principal Receivable/ Liability 1/1/20 94500 36670 7560 29110 65390 12/31/20 12/31/21 36670 5231 31439 33951 12/31/22 36670 27191 33951

Answer 1

	Rent receipt/payment	Interest revenue/expense	Reduction in principal	Receivable/liabiliity
01/01/2020				$94,500
12/31/2020	$37,333	$8,505	$28,828	$65,672
12/31/2021	$37,333	$5,910	$31,423	$34,249
12/31/2022	$37,333	$3,084	$34,249	$0
01/01/2020	Right of use asset	$106,500
	Lease liability		$94,500
	Cash		$12,000
	(ROU recorded)